By Mariya Gordeyeva

ALMATY Kazakhstan-based Freedom Holding, the latest target of Hindenburg Research, plans to keep working with non-sanctioned Russian clients despite a critical report from the short-seller that Freedom describes as speculative and unsubstantiated.

Hindenburg, which has tussled with tycoons such as Carl Icahn and Gautam Adani this year, said its research into Freedom showed the company still does business in the Russian market and had "openly flouted sanctions".

Nasdaq-listed Freedom rejected the report. CEO Timur Turlov told Reuters the company would keep non-sanctioned Russians as clients and said it had disclosed data on how it works with sanctioned customers during around seven inspections by Kazakhstan's financial regulator in the past year.

"We definitely do not take on sanctioned clients, but existing clients can be placed on a sanctions list, and then we block their assets or cut ties with them," Turlov said.

"(Russians) are a minority ... we very carefully check the entire nature of operations, but ... over-compliance is also often harmful for observing the sanctions regime, as well as under-compliance. Overly tightened screws are not always OFAC's goals and lead to distortions," Turlov added.

OFAC refers to the Office of Foreign Assets Control, a U.S. agency that has played a leading role in a series of Western sanctions aimed at punishing Russia for its full-scale invasion of Ukraine in February 2022.

Hindenburg said its research had revealed "hallmark signs of fake revenue" and evidence Freedom "brazenly skirts sanctions", as well as signs of market manipulation in both its investments and its own stock.

Freedom's shares hit a seven-month low on Wednesday, extending losses after having dropped sharply when the report was first published on Tuesday.

Turlov said the company had no plans to relinquish its Nasdaq listing.

Freedom's units are involved in retail securities brokerage, market making and investment banking services. It also owns a bank and two insurance companies operating in Kazakhstan.

Freedom completed the sale of its Russian assets in February 2023 for around $140 million, a deal prompted by Russia's full-scale invasion of Ukraine. At the time, Freedom said it had "completely ceased doing business in Russia".

With no tangible assets in Russia any more, Turlov said Freedom was trying to work with Russian clients the same way Western banks do.

Now, the company is looking at launching banking and brokerage services in Turkey and Azerbaijan, as well as expanding its business in Kyrgyzstan and Uzbekistan, Turlov said.

(Reporting by Mariya Gordeyeva; Writing by Alexander Marrow; Editing by Mark Potter)